CURRENCY
The “Caja de Conversión” (A term for which “Conversion Chest” is the usual clumsy translation, though “Conversion Box” stands as a triumph of the translator’s art. Perhaps “Conversion Office” sounds best, though it does not convey a true idea of vaults filled with sacks of golden coin and therefore “Conversion Bank” is here preferred) is an Argentine Government Institution under the control of the National Ministry of Finance created for the purpose of dealing with the issue, exchange, and conversion of the currency of the country. It issues the paper currency and must hold in reserve sufficient gold to meet the circulating paper money; it also mints the nickel and copper coinage of the country.
Under the Conversion Law a fixed ratio was assigned as between gold and paper. A paper dollar, instead of being theoretically equivalent in value to a gold dollar, was declared to be worth only 44 cents gold; thus with 44 cents gold as the fixed equivalent of one dollar paper and, conversely, 2·27 paper dollars that of one dollar gold, and the smallest gold coin minted the equivalent of 2½ dollars gold, the use of paper in all the odd amounts of everyday transactions is inevitable and consequently the major portion of the gold which reaches the country is forced by the public need of the more convenient currency into the “Caja de Conversión.”
The accumulation of gold in the “Caja” on December 31st, 1915, was well over 61 millions sterling, and it must be noted that these accumulations cannot leave the “Caja” under any consideration (unless by special sanction of Congress), except in exchange for paper currency, until the time when the currency shall be placed on a logically complete metallic basis. The provisions of the Conversion Law in this regard are exceptionally stringent; under them every official of the “Caja,” from the highest to the lowest, is personally responsible for their observance, and they cannot be overruled by any power in the land. So, until Congress approves what is commonly referred to as the conversion, the store of gold in the “Caja” will continue practically intact and will increase.
The misuse of this term “Conversion” has given rise to much confusion of ideas, even in Argentina. The actual conversion took place with the above-mentioned assignment of the fixed ratio of value between gold and paper.
It is obvious that the present is not the moment for the change in the form of the currency, but it should be added that apart from the immediate effects of the war the time for that change has not yet arrived. Irresponsible projects for the change have been put forward from time to time during recent years, but official declarations in that regard have never yet gone further than complacent platitudes to the effect that the time for it was fast approaching; without, however, the faintest indications of any schemes for carrying the change out in practice. Besides, under the Law it cannot be accomplished until a fund or deposit in the Bank of the Nation, and to which the National Government makes contributions out of revenue, has reached the amount necessary to form a reserve against the paper currency in circulation prior to the passing of the Conversion Law. For a long while past, the amount of that fund stood at six millions sterling, but this amount (then still insufficient for such reserve) became reduced in August last to two millions sterling in consequence of special financial measures adopted by the Argentine Government at the outbreak of the war and referred to more fully in the chapter on “The War.”
On the 31st of December, 1914, the Argentine Government held gold accumulations to the value in round figures of 63 millions sterling, of which, as has been seen, 2 millions pertain to the Conversion Fund at the Bank of the Nation. This fund must not be confused with the amounts in the “Caja,” the uses of the former (apart from its constituting, as has been said, a reserve against the paper currency in circulation previously to the passing of the Conversion Law) being limited to the purposes of foreign exchange, the benefit of the Fund itself and to aid the control of the market; while the accumulations in the “Caja” can only, in normal circumstances, leave it in exchange for paper currency.
Besides the actual gold in the “Caja” this Institution held at the end of 1915 gold and bonds to the value of over 14 millions sterling which had been deposited at the various Argentine Legations. These deposits have naturally increased largely since. Besides all this the Bank of the Nation, the Bank of the Province of Buenos Aires and the private banks held large amounts of gold.
Uruguay has not introduced, and has always resisted the temptation to introduce, any such complications of her currency; which is on a thorough gold basis.